Are you tired of paying exorbitant medical, dental, vision, or hearing bills with after-tax dollars? Look no further than flexible spending accounts (FSAs)! These accounts are a powerful tool that allow individuals to pay for eligible health care and dependent care expenses with pre-tax dollars.
Here’s how it works:
As an employee, you agree to contribute a portion of your pre-tax salary into an FSA. This money is then automatically deducted from your paycheck spread across the year. The amount you contribute to the FSA is excluded from FICA, federal, state, and local taxes.
You get to adjust your annual taxable salary down. This can potentially translate to significant tax savings depending on your tax bracket.
FSAs can also help stretch your dollars if you have out-of-pocket medical, dental, vision, hearing, or dependent care expenses beyond what your insurance plan covers.
Enrolling in an FSA is easy and can be done in two simple steps:
- Determine your annual election amount for your FSA.
- Estimate the expenses that you know will occur during the year, including out-of-pocket expenses for yourself or anyone you claim as a dependent on your taxes.
In summary, FSAs are a win-win. You get to save on taxes and contribute to a valuable account that helps you pay for eligible health care and/or dependent care expenses. Read our article to learn more.